Tuesday, October 28, 2014

Keep the light on is fundamental, but investing on value adding projects is progressive.IT has quite a few
impressive mantras such as, doing more with less, doing more with innovation, every
budget is business budget, IT is business. However, every CIO knows that walking the
talk is not an easy task due to the complexity of IT, the legacy system in
traditional organizations and the emerging changes with accelerated speed. From IT
management perspective, what percentage of your IT budget is spent on
project-related work? Also, do you see this percentage changing in future in order to manage IT more efficiently and effectively?

It depends on the size of IT
organization. Let's assume that a project (at minimum) consists of a basic plan,
schedule, and has regular status (progress) reports. This percentage may vary
greatly based on the types of business and the degree of IT support, the maturity of the IT
organization. Smaller companies have more nimble approaches, there’s high
percentage ratio (50/50) of development vs. support. Even established companies
under 500M can move pretty quickly. But they also tend to have 1-2 big projects
not 50 ! The medium companies (500-1.5B) have an interesting mix. Most grew
through acquisitions so the mix tends to swing down to 30/70 of development vs.
support. Some better, some worse.For
the over 1.5B crowd, it's a lot more complicated, 20% development joined by 10%
refresh (making existing applications fit new roles) and the massive 70%
maintenance.

IT maturity matters more than the
size: Yes, size matters, but the types
of systems have a greater effect than size. While larger companies are more
likely to have huge legacy systems that require a lot of maintenance. Also,
let's take the example of the $1.5B companies: wouldn't a percentage of the
support and maintenance work be project-related? Certainly a refresh is project
related? For the overall IT budget that includes, support, outsourcing and
salaries, project spending is not easy to go above 30%. With the emerging Cloud
technology and on demand SAAS model, more IT organizations are shifting from
CapEx to OpEx, it has better opportunities to spend more on growth and
transformation driven projects.

It also depends on the methods of budget
calculation: some companies charge project work to the business if they are doing business
initiatives, but if the project is part of an IT initiative, it usually has a
25/75 ratio (New project/ maintenance). It also depends on how you calculate
the project cost. By "project-related work", are you including the staffing
costs for the project? If a developer spends 50% of his/her time on projects,
half his/her salary should be considered as a project related expense. Does
that change the percentages of IT budget ratio?

There’s
no magic formula to assign IT budget with one size fitting all solutions. The
wise IT leaders just have to set the project priority right and focus on
overall business strategy, keep the light on is fundamental, but investing on
value adding projects is the way to improve IT maturity and enable business top
line growth, it takes analytics and practice to run IT in the most efficient,
effective and agile way.